The Fed was flying blind this week

Imagine a pilot trying to fly a plane in a cockpit without any dashboard or instruments. Like mid-flight, all the screens went dark and the tower stopped relating any relevant info about weather or other flight patterns. The Fed was that pilot this week, trying to land the plane blindly. Why? We are on day 30 and counting of a government shutdown so they didn’t have any of the data or key reports they usually do when they meet and make an interest rate decision.

The market felt the impact of this landing.

The Fed cut 25 bps, and they did so while saying they were operating with incomplete economic data due to the ongoing shutdown. That means policy is being made, the plane is being flown full speed, without visibility. I’m not trying to be dramatic. This is real and it raises the risk of misjudging the economy and impacts market confidence. When the Fed is tentative rather than confident, that uncertainty bleeds into mortgage rates. Which is why we saw them jump up rather than improve on the news.

That trickles down to borrower behavior which impacts sellers through demand and we’re off to the races…

In practical terms, we are still closing loans every day.

Aside from properties in flood zones, it’s still business as usual here. And even for those properties, you can obtain private flood insurance – it’s more expensive but you are able to switch policies after closing once FEMA reopens.

Sad News

Of course this shutdown has impacts that go beyond real estate. While it’s not necessarily Happy Hour conversation, I would feel shallow to now address the hundreds of thousands of federal employees working without pay or furloughed. The economy is projected to have lost a cool 7 -14 billion dollars which could impact the GDP 2 full percentage points in the fourth quarter. This is of course the fault of the Radical Left, because while the Republicans control the House, Senate, White House, and Supreme Court – the Democrats are not budging on healthcare issues. According to Kaiser Family Foundation (KFF), without the expiring credits under the American Rescue Plan and subsequent extensions, out-of-pocket premium payments among subsidized enrollees will increase by 75 to 114%. That means many families would see their premium increase tens of thousands of dollars in a single year.

Just an hour ago, a federal judge blocked the administration from cutting food stamps off for 42 million Americans though. The justice department had argued that the SNAP program didn’t exist during a shutdown so there were no congressionally approved funds. Judge McConnell told them to go ahead and use the six billion dollars in contingency funds already set aside by Congress to continue issuing SNAP benefits. His quote was, “There is no doubt, and it is beyond argument, that irreparable harm will begin to occur if it hasn’t already occurred in the terror, it has caused some people about the availability of funding for food for their family.”

Looking ahead…

As I said, we’ll continue to close loans during the shutdown. If it continues all the way to the next Fed Meeting – my guess is, they will cut again. It’s an educated guess based on layoffs we are seeing in the labor market. Which is of course the other half of the Fed’s dual mandate – keep inflation under control while supporting American jobs. By the end of September, US employers had cut nearly one million jobs. That’s the largest number of layoffs we’ve seen since 2000. This week Reuters reported Amazon was cutting 30,000 corporate jobs but then next day Amazon confirmed about half as many layoffs with more cuts expected later. It’s important to pay attention to these white-collar layoffs…think about it…who can afford to buy right now? On the other hand, this will pressure the Fed to reduce borrowing costs to stimulate the economy.

Zillow is in trouble again.

Our favorite real estate tech firm is facing antitrust/legal pressure – they’ve had a no good, awful month actually. There are several high-stakes lawsuits, including one from the FTC, one from CoStar Group for copyright infringement and one from Compass. Meanwhile, I want you all to be the first ones telling your spheres about Cribio. It’s a new consumer facing site of the Broker Public Portal. It is designed to be consumer first, unlike other platforms that basically serve to turn users into monetized leads sold to realtors and lenders. Publicly, Cribio is saying they only hope to break even and hope to provide an ethical alternative to Zillow and Redfin. I posted a reel last week that got people very worked up about Rocket and Redfin so I’m interested to hear what you all think about Cribio.

Will consumers be able to break their Zillow habit?

Future is Female

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